As federal and state legislatures discuss the regulatory future of payday loan establishments across the United States, a new study suggests that a considerable number of Americans are in full support of more regulations over payday lenders.

According to the results of a Pew Charitable Trusts survey, 75 percent said payday loan companies should be more regulated. Just one in 10 American respondents polled in May maintained positive attitudes towards bad credit loan businesses.

The Pew survey discovered that more than three-quarters (78 percent) of U.S. consumers are in favor of mandating payday lenders to check a borrower’s ability to repay a loan prior to issuing funds. Also, 75 percent of respondents concurred that consumers should be permitted to make payments for a two-week loan over the course of several months.

88 percent of the survey pool couldn’t tell the difference between an affiliate bad credit loan website and a direct lending (AdvanceAmerica) website.

It was noted by the researchers that just 12 million Americans use payday loans each year. The average payday loan is $375. However, this number soars because in a lot of cases the loan is not paid back in the allotted time period. In addition to fees, the average payday loan then exceeds $500.

“Payday loans typically carry annual percentage rates of 300 to 500 percent and are due in a lump sum, or balloon payment, on the borrower’s next payday, usually about two weeks later,” Pew said in a report. “These loans are advertised as quick fixes for unexpected expenses, but repaying them consumes more than a third of an average borrower’s paycheck, leading to repeated borrowing for an average of about half the year.”

For those who are unable to pay rent or cover a utility, what’s the solution? Since a lot of payday borrowers are those with limited credit options, 78 percent of consumers believe financial institutions and credit unions should offer small loans at rates that are lower than payday lenders.

Industry leaders say, however, that a part of the reason why interest rates are so high is because these are short-term loans that come with higher borrowing costs. This is perhaps why banks are apprehensive in embracing this business model.

CFPB Flexing Regulatory Muscles

In March, the Consumer Finance Protection Bureau (CFPB) released proposed regulations to tighten the rules of the payday loan industry. This initiative would attempt to eliminate so-called “payday debt traps” by ensuring payday loan companies take steps to help customers repay their loans.

Some of the rules would prohibit payday lenders from trying to receive payments from consumers’ bank accounts. The CFPB says this leads to the collection of excessive fees.

The new regulations would be applied to payday loans, deposit advance products, vehicle title loans and other high-cost installment loans.

“Too many short-term and longer-term loans are made based on a lender’s ability to collect and not on a borrower’s ability to repay,” said CFPB director Richard Cordroy in a statement. “The proposals we are considering would require lenders to take steps to make sure consumers can pay back their loans. These common sense protections are aimed at ensuring that consumers have access to credit that helps, not harms them.”

These rules, says the CFPB, would prevent those living paycheck to paycheck from taking out loans to pay other loans. The CFPB believes consumers living paycheck to paycheck find it extremely difficult garnering enough funds to pay off the principal in addition to the fees prior to the due date.

The conclusion is that the CFPB has the support of the general public, and this could make it very hard for payday lenders to stay in business moving forward. Of course, this could provide a wealthy opportunity for traditional financial institutions.